The World

In Principle, a Case For More 'Sweatshops'

By ALLEN R. MYERSON

Published: June 22, 1997

CAMBRIDGE, Mass. FOR more than a century, accounts of sweatshops have provoked outrage. From the works of Charles Dickens and Lincoln Steffens to today's television reports, the image of workers hunched over their machines for meager rewards has been a banner of reform. Last year, companies like Nike and Wal-Mart and celebrities like Kathie Lee Gifford struggled to defend themselves after reports of the torturous hours and low pay of the workers who produce their upscale footwear or downmarket fashions. Anxious corporate spokesmen sought to explain the plants as a step up for workers in poor countries. A weeping Mrs. Gifford denied knowing about the conditions. —
Now some of the nation's leading economists, with solid liberal and academic credentials, are offering a much broader, more principled rationale. Economists like Jeffrey D. Sachs of Harvard and Paul Krugman of the Massachusetts Institute of Technology say that low-wage plants making clothing and shoes for foreign markets are an essential first step toward modern prosperity in developing countries.

Mr. Sachs, a leading adviser and shock therapist to nations like Bolivia, Russia and Poland, is now working on the toughest cases of all, the economies of sub-Saharan Africa. He is just back from Malawi, where malaria afflicts almost all its 13 million people and AIDS affects 1 in 10; the lake that provided much of the country's nourishment is fished out.

When asked during a recent Harvard panel discussion whether there were too many sweatshops in such places, Mr. Sachs answered facetiously. ''My concern is not that there are too many sweatshops but that there are too few,'' he said.

Mr. Sachs, who has visited low-wage factories around the world, is opposed to child or prisoner labor and other outright abuses. But many nations, he says, have no better hope than plants paying mere subsistence wages. ''Those are precisely the jobs that were the steppingstone for Singapore and Hong Kong,'' he said, ''and those are the jobs that have to come to Africa to get them out of their backbreaking rural poverty.''

Rising Stakes

The stakes in the battle over sweatshops are high and rising. Clinton Administration officials say commerce with the major developing nations like China, Indonesia and Mexico is crucial for America's own continued prosperity. Corporate America's manufacturing investments in developing nations more than tripled in 15 years to $56 billion in 1995 -- not including the vast numbers of plants there that contract with American companies.

In matters of trade and commerce, economists like Mr. Sachs, who has also worked with several Government agencies, are influential. A consensus among economists helped persuade President Clinton, who had campaigned against President Bush's plan of lowered restrictions, to ram global and North American trade pacts through Congress.

Paradoxically, economists' support of sweatshops represents a sort of optimism. Until the mid-1980's, few thought that third world nations could graduate to first world status in a lifetime, if ever. ''When I went to graduate school in the early to mid-1970's,'' Mr. Krugman said, ''it looked like being a developed country was really a closed club.'' Only Japan had made a convincing jump within the past century.

Those economists who believed that developing nations could advance often prescribed self-reliance and socialism, warning against foreign investment as a form of imperialism. Advanced nations invested in the developing world largely to extract oil, coffee, bananas and other resources but created few new jobs or industries. Developing nations, trying to lessen their reliance on manufactured imports, tried to bolster domestic industries for the home market. But these protected businesses were often inefficient and the local markets too small to sustain them.

From Wigs to Cars

Then the Four Tigers -- Hong Kong, Singapore, South Korea and Taiwan -- began to roar. They made apparel, toys, shoes and, at least in South Korea's case, wigs and false teeth, mostly for export. Within a generation, their national incomes climbed from about 10 percent to 40 percent of American incomes. Singapore welcomed foreign plant owners while South Korea shunned them, building industrial conglomerates of its own. But the first stage of development had one constant. ''It's always sweatshops,'' Mr. Krugman said.

These same nations now export cars and computers, and the economists have revised their views of sweatshops. ''The overwhelming mainstream view among economists is that the growth of this kind of employment is tremendous good news for the world's poor,'' Mr. Krugman said.

Unlike the corporate apologists, economists make no attempt to prettify the sweatshop picture. Mr. Krugman, who writes a column for Slate magazine called ''The Dismal Scientist,'' describes sweatshop owners as ''soulless multinationals and rapacious local entrepreneurs, whose only concern was to take advantage of the profit opportunities offered by cheap labor.'' But even in a nation as corrupt as Indonesia, he says, industrialization has reduced the portion of malnourished children from more than half in 1975 to a third today.

In judging the issue of child labor also, Mr. Krugman is a pragmatist, asking what else is available. It often isn't education. In India, for example, destitute parents sometimes sell their children to Persian Gulf begging syndicates whose bosses mutilate them for a higher take, he says. ''If that is the alternative, it is not so easy to say that children should not be working in factories,'' Mr. Krugman said.

Not that most economists argue for sweatshops at home. The United States, they say, can afford to set much higher labor standards than poor countries -- though Europe's are so high, some say, that high unemployment results.

Labor leaders and politicians who challenge sweatshops abroad say that they harm American workers as well, stealing jobs and lowering wages -- a point that some economists dispute. ''It is especially galling when American workers lose jobs to places where workers are really being exploited,'' said Mark Levinson, chief economist at the Union of Needletrades, Industrial and Textile Employees, who argues for trade sanctions to enforce global labor rules.

Yet when corporations voluntarily cut their ties to sweatshops, the victims can be the very same people sweatshop opponents say they want to help. In Honduras, where the legal working age is 14, girls toiled 75 hours a week for the 31-cent hourly minimum to make the Kathie Lee Gifford clothing line for Wal-Mart. When Wal-Mart canceled its contract, the girls lost their jobs and blamed Mrs. Gifford.

No Jobs in Practice

Mr. Krugman blames American self-righteousness, or guilt over Indonesian women and children sewing sneakers at 60 cents an hour. ''A policy of good jobs in principle, but no jobs in practice, might assuage our consciences,'' he said, ''but it is no favor to its alleged beneficiaries.''